In markets with switching costs, prices increase as firms’ market shares grow. I study the effect of entry on these price dynamics in the Dutch mortgage market. I exploit incumbents’ multi-product nature to control for unobserved firm-level differences, while a difference-indifferences strategy controls for market-level shocks by exploiting that only some mortgage products faced increased competition. Consistent with a simple theoretical framework, banks with more locked-in customers decrease their interest rates less after entry than smaller incumbents. This can explain why policies that encourage competition often disappoint in markets with switching costs. I also discuss implications for competition policy.
|Status||Udgivet - 2020|
|Begivenhed||The 18th Annual International Industrial Organization Conference. IIOC 2020 - Northeastern University, Boston, USA|
Varighed: 1 maj 2020 → 3 maj 2020
Konferencens nummer: 18
|Konference||The 18th Annual International Industrial Organization Conference. IIOC 2020|
|Periode||01/05/2020 → 03/05/2020|